Calix has been one of the major success stories in the highly competitive technology communications space over the past several years. Although it’s a company that few consumers would immediately recognize by name, the Calix cloud and software platforms empower internet service providers of all categories and sizes to transform and electrify their businesses.
On a more practical level, Calix’s capabilities and tools allow business service providers (BSP) to support and promote their subscribers via compelling experiences, which we’ll detail. For BSPs, this translates into creating a stronger, stickier bond with customers via more substantial customer acquisition, heightened loyalty, and long-term revenue potential.
The Calix strategy of focusing on BSPs, in almost a maniacal manner, has paid off with business results. Despite challenging supply chain issues, the company recently reported record revenues of US$236.2 million in the third quarter of its fiscal year 2022. Calix is on track to exceed its 2021 revenue of $679.4 million, a 25.5% improvement over fiscal 2021.
SMB and MDU Market Opportunities
Calix, on Nov. 16, announced new solutions specifically designed to help BSPs expand their footprints into the SMB (small and midsize business) and MDU (multi-dwelling unit) markets.
Built on Calix’s foundation of proven appeal in the single-family home market, these new products will take advantage of use cases that solve real connectivity problems at small businesses, apartment complexes, duplexes, triplexes, quadplexes, and mixed-use properties.
Calix has good reason to believe that its managed Wi-Fi strategy, which has enjoyed strong appeal in the single-family home market, will experience significant traction in the SMB and MDU markets.
There is a healthy demand for ubiquitous Wi-Fi coverage equally in these markets, and the management aspects often have the same pain points with single-family homeowners. Said a bit differently, most SMB and MDU customers do not like to deal with the hassle of managing the technical complexity of router setup, maintenance, and upgrades.
The SMB and MDU markets are not tiny. The U.S. Small Business Administration reports 32.5 million small companies — broadly defined as businesses with fewer than 500 employees — operating in 2021, a remarkable 99.6% of all businesses. Moreover, it is projected that there will be 126.7 multi-family dwellings at the end of 2022, up from 68.8 million in 2019.
New Wi-Fi Systems Address Connectivity Needs
Calix introduced two new systems, the GigaPro GPR8802x and GigaSpire BLAST u4g. Both products are explicitly designed to address the wireless connectivity needs of the SMB and MDU markets.
The GigaPro GPR8802x is a “purpose-built” switch designed for use by SMB and MDU customers. At a technical level, it’s an Ethernet-based managed switch/ONT (Optical Network Terminal, aka modem) solution that provides seamless WAN integration, which facilitates the ability of BSPs to manage it as a single system.
This aspect is critical as it gives BSPs end-to-end visibility and management with the Calix Support Cloud and the Calix Operations Cloud. With eight configurable Ethernet ports, eight analog voice ports, and automated service provisioning, this switch can quickly open new markets to BSPs that desire to cultivate their value proposition in their local communities.
Calix family of GigaSpire Blast u4 systems | Image Credit: Calix
Calix’s managed services appeal gets a shot of adrenalin with the GigaSpire BLAST u4g, an integrated GPON (Gigabit Ethernet Passive Optical Network) with residential gateway capability. Calix designed this product with “aesthetic shelf appeal” that homeowners and renters will find refreshing and cool. The product supports fast Wi-Fi 6 wireless connectivity, making it ideal for apartment or condo dwellers in large properties or buildings.
Benefits for BSPs
From a business perspective, the GigaSpire BLAST u4g can potentially optimize the opportunity for BSPs to attract residential market opportunities because it can deliver formidable and highly secure Wi-Fi to MDUs. Most importantly, the product nicely integrates into the Calix Revenue Edge platform for the dependable conveyance of the company’s growing list of managed services.
The following examples come to mind that underscore what the business impact could be:
- BSPs could use these solutions to help offer apartment owners the ability to provide highly secure monitoring services in their units, e.g., smart door lock control and video monitoring.
- From an SMB perspective, BSP could use these products to provide retailers with the ability to provide guest internet services with interesting e-commerce and advertising implications.
- Calix’s ability to provide BSPs with a customized mobile app — not to mention BSP co-branding possibilities with SMB and MDU customers — sets it apart from large, institutional internet providers like Comcast and Spectrum.
These solutions set the stage for Calix fulfilling its “SmartTown” concept, which would allow BSPs to support continuous, seamless Wi-Fi access across homes, businesses, and schools in local communities.
Analyst Thoughts
It’s hard to deny the momentum behind Calix’s strategy, which has been playing out over the past several years. Clearly, market tailwinds are favorable to what the company is striving to accomplish in the communications and connectivity areas.
Interview with Calix CEO and President Michael Weening
First, consumers are exhausted at the seemingly endless parade of new “alphabet soup” wireless topologies that come to market every 18 months or so.
Even though new wireless topologies offer substantial speed and latency benefits for consumers in gaming, working from home, videoconferencing, and streaming video, many users resist upgrading their wireless routers by themselves to simply avoid the hassle.
Wi-Fi 6 and Wi-Fi 6E are now rolling out, and still, many consumers will not upgrade if the complexity is bothersome and the benefits of upgrading are not made clear and compelling.
Secondly, Calix realizes that SMB and MDU customers have the same interest in new wireless capabilities as single-family homeowners.
Renters, in particular, want to enjoy the speed and latency benefits of faster routers but don’t want to invest in their own hardware. Moreover, there are significant incremental revenue opportunities for landlords who can offer bundled value-add wireless services to their tenants that are fast, secure, and easily managed.
SMB customers increasingly depend on reliable wireless connectivity at an operational and “guest customer” level. Unlike enterprises, SMBs often lack dedicated IT staff and the required resources that a local BSP can provide to manage the small business’s wireless system and support any value-add services the BSP might offer.
Marketing Priorities
It cannot be overstated that the broadband market is highly competitive. Calix is supremely aware of this and appears to be taking significant steps to differentiate itself with platforms and solutions that allow BSPs to reduce operational expenditure, deliver more valued-based “sticky” services to their subscribers, and the ability to customize their offerings.
Going forward, Calix must continue to craft unique, compelling, and highly detailed usage model examples that BSPs can customize and message to their subscribers.
Creating and delivering new, easy-to-understand marketing content (particularly video), including subscriber testimonials that homeowners, SMBs, and MDU residents can wrap their heads around, must remain a priority for the Calix marketing team.
The company’s relative anonymity with consumers has not hindered Calix as it has been forthright in its view that its success is highly dependent on the success of its BSPs.
From a business results standpoint, this has proven to be highly effective as Calix happily plays the role of a behind-the-scenes entity that allows BSPs to build solid and durable relationships with their subscribers.
With this backdrop, there’s little reason to believe that the Calix playbook won’t work in the SMB and MDU markets, given the similarity of challenges, needs, and long-term desires shared with the single-family homeowner market.
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